Distance to destination and export price variation within agri-food firms

This paper assesses how bilateral distance affects within-firm-product variation in free-on-board (FOB) export prices across destinations. I estimate linear models that regress firm-product-destination-time FOB unit values on distance, firm-product-time fixed effects and destination country controls. If distance doubles, the average Swiss agri-food firm increases its FOB export price by 2.3 per cent. However, the positive distance elasticity of export prices reflects product quality differences and/or variable markups. I disentangle both mechanisms and show that, for a given product quality, exporting firms charge higher markups in distant markets. Nevertheless, this form of price discrimination is less pronounced for higher-quality products.

Automated summary

This paper assesses the impact of bilateral distance on within-firm-product variation in FOB export prices across destinations. The findings suggest that an increase in distance leads to a higher export price, which can be attributed to both differences in product quality and variable markups. Furthermore, it is observed that exporting firms charge higher markups in distant markets, although this form of price discrimination is less pronounced for higher-quality products.